• Deflation continued in March
• Cheaper motor fuels and food behind the drop in prices
• Inflation expected at around 0% in 2015 (-0.1% in 2014)

In March, consumer prices decreased by 0.6% compared with the previous year and increased by 0.6% compared with the previous month. Prices, especially energy and food prices, are expected to increase gradually during the second half of 2015. Inflation rate is expected to be around 0% in 2015 as a whole.

Volatile motor fuel prices have had the biggest impact on consumer prices recently. The prices of fuels increased by 4.6% in a month, but remained still 11.3% lower than in March last year. Global crude oil prices grew in euros compared with February due to the continued weakening of the euro exchange rate against the USD. There is abundant supply of crude on the market and recent negotiations with Iran will probably mean a gradual loosening of the current sanctions. Iran holds up to 10% of global oil stocks, while its production volumes have fluctuated between 3% and 5% of global oil supply during the last 30 years.

In addition to energy, food prices also fell in Estonia compared with last year. According to the FAO, global food prices have been on a declining path since April last year due to good crops and high stocks, but also because of stronger dollar against several leading food exporters’ currencies.

The EUR was 22% weaker against the USD in March, on average, compared with last year. According to the Central Bank of Estonia, around 1/3 of the imports of goods and services are paid in the USD in Estonia. As most of these goods and services are either raw materials or capital goods (and not consumer goods), the weaker euro is expected to lift Estonia’s inflation with a certain lag.